At the same time, Sir Mark Walport, the Government Chief Scientific Adviser in the UK, offers a different set of blockchains:
- unpermissioned (open) public ledgers;
- permissioned (closed) public ledgers;
- permissioned (closed) private ledgers.
Private vs public
In most cases, to avoid confusion and misunderstanding, they often identify only two main blockchain types: public (open) and private (closed). The first type includes initially unpermissioned (closed) lists of ledger entries. The second one is completely open and doesn't need a supervisory authority.
To understand the difference between blockchains, try to answer these questions:
1. Who's allowed to create ledger entries?
2. Who has access to critical data?
3. Who's responsible for the network integrity?
Well, we made it sound so simple. However, existing practice shows that it's still not so easy to feel the difference between two aforementioned blockchain types. The reason is, there's a number of points common to public and private "chains." Here we give you some of them:
- Both are decentralized P2P networks that use shared transaction ledgers. Typically, such systems are used to build reliable cryptocurrency exchange platforms.
- Both use special rules (consensus mechanisms) to align the ledger contents.
- Both guarantee the integrity of the registry in case of a collision with scammers or hackers. You can check the list which will provide a high level of security.
… and so different
In general, a need to use a particular blockchain kind is based on the essential user needs. Some businesses don't support the idea of an open network due to specific nature of their activities. Instead, they prefer to deal with private (closed) peer-to-peer networks that provide an opportunity to control all transactions single-handedly.
As for a public blockchain, it allows any participant to create and monitor transactions. Using special algorithms (proof of work or proof of stake), the system can boast of a pretty high security level.
Pros of a public ledger
Perhaps, the main advantage of an open blockchain is the absence of a supervisory authority. Everyone can coordinate transactions within the network including, developers, miners, manufacturers, customers, etc.
Moreover, an open network allows to develop decentralized apps that require minimum maintenance costs.
As for the other pros of a public ledger, they are:
- No more censorship. In an open system, it's pretty hard to change vital elements without any concern about other parts. As a result, open ledgers offer better confidence level. Weakness is often strength, indeed!
- Strong network effect. In an open system, a developer has better chances to gather users around a new application. The point is, all parts of an open ledger can contact each other directly from any part of the globe. So, information spreads in a jiffy. Usually, it's only enough to let your web-wallet support available apps to stay informed.
- Data security at a fair price. In addition, to attack an open ledger, hackers will need a set of really powerful solutions. In other words, hacking a public network isn't cost-efficient even for the most determined intruders.
Pros of a private ledger
As stated above, private blockchains limit access to transactions between the parts. All important functions including transaction verification, audit and database coordination are available to a limited number of persons. In other words, a private ledger is a centralized system with its very own set of rules.
Frankly, closed blockchains often can do little more than a traditional database. Just like a database, a private ledger offers permissions, multiple input validation, multiple copies, append-only writes and logs of all people accessing it.
Nevertheless, private blockchain has its advantages. They are:
- Cheaper transactions. In opposite to public ledgers, is a closed network all transactions between the parts are verified by a few authorized persons.
- Private ledger can boast of higher transactions-per-second (TPS) parameter limited by capacity of the weakest network node.
- Prompt transaction verification.
- Transaction rollback. In case of need, a company owning a ledger can cancel transactions and change the balance. Sometimes, that approach pays off and allows to prevent the transfer of valuable assets to fraudsters.
It's time to sum up
As you can see, public and private blockchains are different enough. It would be nearer the truth to say: "Private AND Public" instead of "Private VS Public." Each system has its own pros and cons. The only thing you really need is to decide: which type of blockchain responds better to your current needs.
Another good news is that there are project like Dubbed Aion implemented by Nuco Inc. The main goal of those projects is to combine private and public ledgers in order to ensure safe and fast data transfer between different networks.